Reason Foundation

DC City Council Passes Law Likely to Kill 1,000 Jobs

Today the Washington, D.C. city council voted 8-5 to force Wal-Mart to pay their workers no less than $12.50 per hour if the world wide chain continues with plans to build stores in the area. The Large Retailer Accountability Act was designed by the city council to make Wal-Mart pay a "living wage," and requires large retailers to pay workers at least 50% more than minimum wage. Before the ruling Wal-Mart threatening to terminate their plans to build in the D.C. area, since the wage floor directly cuts into the business model of the retail giant. While some D.C. elitists will undoubtedly rejoice and say good riddance to the "big box" retailer, many other, less fortunate residents of D.C. will remain jobless as a result of this unfair, job-killing proposal.

The academic literature is certainly mixed on how much the minimum wage affects overall employment (see here and here). However, research does decidedly show that increases in the minimum wage adversely affect the earned income of low wage workers -- precisely the type of worker that will find employment at Wal-Mart.

While the aforementioned studies are interesting, it is important to note the differences between the general minimum wage laws analyzed in these papers and what is happening in D.C. In the case of Walmart and D.C., the wage law only applies to certain large retailers, not businesses in general. It is also not a marginal change. The law increases the minimum wage paid by Walmart by over 50%. Is it any wonder that Wal-Mart is thinking about pulling out of the D.C. market when many of its workers will cost 50% more than what their competitors pay?

But enough about how this is unfair to Walmart, what does it mean for job seekers? With an unemployment rate in the District (8.5%) higher than the national average (7.6%) the D.C. city council's bill will eliminate nearly a thousand possible jobs that were already set to open up in D.C. In fact, if Wal-Mart follows through on their plan to withdraw from the D.C. market, the earned income of the nearly 1,000 workers that would have chosen to work at Wal-Mart will definitely fall, since presumably these workers would have only chosen to work at Wal-Mart if the pay there was higher than their next best option (which for a number of people right now is sitting a home at a computer filing job applications).

What's better: a job that pays minimum wage or no job at all? Which is more livable: minimum wage income or no income at all?

While the overall employment effects of general minimum wage laws may be ambiguous, the employment effects of the D.C. proposal are not. The D.C. city council's bill will fail to improve anyone's standard of living and instead deny consumers access to low-priced goods and services and jobs.